'The most expensive regulation ever'

The Obama administration proposed a draft air pollution rule on Wednesday that business groups charge could be the costliest regulation of all time — setting up a test of how hard the president will fight for his environmental agenda against a newly strengthened GOP.

President Barack Obama has already blinked once on the rule, which aims to limit smog-creating ozone pollution after 2020 from power plants and factories: Just before Labor Day in 2011, he forced the Environmental Protection Agency to withdraw an almost-final version of the rule, infuriating green groups that accused him of capitulating to industry pressure to ease his reelection. Obama said he was acting to “underscore the importance of reducing regulatory burdens and regulatory uncertainty.”

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Now, facing a court order to issue a new proposal by next week, EPA has just issued a rule essentially as strong as the one the White House squelched three years ago — though not quite as strict as many environmental groups are calling for. It would lower the amount of ground-level ozone pollution that is considered healthy to breathe, which in turn could lead to costly new requirements for air pollution permits in much of the country.

The administration contends the health benefits would far outweigh the costs, and would include fewer deaths, hospitalizations and missed days at school or work from illnesses like asthma or bronchitis. States would have to meet the new standards between 2020 and 2037.

But Republicans are getting a second chance, too — to try to make Obama back down again on what they see as a multitrillion-dollar hit to the economy. Some think they can at least get him to bargain on ozone, an issue that seems less central to his legacy than his efforts to combat climate change.

Greens, who welcomed Wednesday’s news, hope an increasingly activist Obama will have their backs this time.

“This decision will be a big test for the president,” said Janice Nolen, assistant vice president for national policy at the American Lung Association, a group that called the White House’s 2011 cave-in “inexcusable.” She said before Wednesday’s proposal that health organizations want Obama to treat ozone — a pollutant linked to ailments like asthma and heart attacks — with the same urgency as climate change.

“I cannot imagine Obama would use this as some sort of bargaining chip,” said Frank O’Donnell, president of Clean Air Watch. “Does he really want to be remembered as the guy who traded away public health protection?”

Rena Steinzor, president of the Center for Progressive Reform, said she hopes Obama will be in a mind-set of “‘I am liberated and I’m able to do what I want to cement my legacy,’ which is the way he sort of reacted on immigration, and has gotten a lot of applause on that, despite the endless screaming by conservatives.”

But business groups are just as adamant that a tough new limit on ozone would devastate the economy by making it difficult to open or expand hundreds of manufacturing plants in much of the country. “This would be the most expensive regulation ever imposed on the American public,” said the National Association of Manufacturers, in a July study calculating that an especially strict version of the rule would wipe out $3.4 trillion in economic output and 2.9 million jobs by 2040.

On Wednesday, the association said EPA’s proposal jeopardizes the nation’s manufacturing comeback and indeed “threatens to be the most expensive ever.” The ozone draft “comes at the same time dozens of other new EPA regulations are being imposed that collectively place increased costs, burdens and delays on manufacturers, threaten our international competitiveness and make it nearly impossible to grow jobs,” the group said.

And setting the standard as low as the environmental groups want would be “insane,” association Vice President Ross Eisenberg said before Wednesday’s announcement. Politically, he added, “I think the case can be made that it’s not worth the trouble.”

Indeed, Republicans are already on the march against the rule. Oklahoma Sen. Jim Inhofe, the incoming chairman of the Senate Environment and Public Works Committee, said in a statement Tuesday night that EPA’s proposal “will lower our nation’s economic competitiveness and stifle job creation for decades,” and he vowed that it “will face rigorous oversight” from the new Congress.

Louisiana Sen. David Vitter argues that tightening the ozone standard “will shut down job-creating projects in every state,” and South Dakota Sen. John Thune introduced legislation that would force EPA to postpone the action. “I expect there to be strong, bipartisan opposition to what will be the most expensive EPA regulation in history,” Thune said in a statement Monday, adding that a lower ozone limit would “have a devastating impact on American jobs and energy prices.”

The rule also alarms some Democrats, such as Kentucky Gov. Steve Beshear, who pleaded with Obama last week to back off. “The growth of our economy is dependent on it,” he wrote.

By law, EPA must set the air quality standard based on what the best science says is safe to breathe, and not on how much it will cost to get there. Still, EPA said the economic benefits would outweigh the costs by a wide margin: Under the strictest version of EPA’s proposal, the costs in 2025 would amount to $16.6 billion, compared with $21.2 billion to $42.1 billion in benefits, including a reduction in illnesses and premature deaths.

The Congressional Research Service said in October that it’s far too soon to gauge how much the regulation could cost over the coming decades. And greens say industry groups have been doomsaying environmental regulations for more than 40 years, ever since laws like the Clean Air Act were passed, only to be proven wrong again and again.

“We’ve heard the sky-is-falling rhetoric before,” said Elena Craft, a senior scientist at the Environmental Defense Fund. “And in every case, American ingenuity and creativity have allowed us to move on and to do the things that we need to do to get those control measures in place and to bring cleaner and healthier air to all Americans.”

Industry groups made similarly dire warnings in the 1990s when the Clinton administration was setting an ozone standard less strict than the current Obama administration proposal, the Center for American Progress noted in an analysis three years ago. Instead, “strengthening the ozone standard in 1997 did not lead to the economic devastation that industry and business groups predicted,” the group reported.

The Supreme Court made abundantly clear in 2001 — via one of Justice Antonin Scalia’s trademark sharp-tongued opinions — that EPA cannot consider implementation costs when setting the air quality standard. The public health costs of a tight ozone standard may well “offset the health gains achieved in cleaning the air — for example, by closing down whole industries and thereby impoverishing the workers and consumers dependent upon those industries,” Scalia wrote. “That is unquestionably true, and Congress was unquestionably aware of it.”

Scalia added that the law provides for cost considerations in other areas of implementing pollution rules. Just not this one.

EPA Administrator Gina McCarthy insisted to reporters last week that “it’s not a political decision.” On Wednesday, she said the agency is basing its decision on “the latest science.”

Ground-level ozone — the main component of smog — is emitted by chemical reactions between two common pollutants: nitrogen oxides and volatile organic compounds. Particularly virulent on hot days, ozone can trigger a variety of health problems from chest pain to asthma attacks to early death.

Complicating the debate is the way EPA enforces this kind of air pollution standard: If air monitors show that a community is exceeding the limit, EPA deems the entire area to be out of compliance, which means that companies hoping to expand or build new facilities face a higher threshold for getting air permits and often have to pay to offset their emissions. In communities that just barely meet the standards, any new industrial activity could shift the area into running afoul of EPA.

The existing ozone standard, created by the George W. Bush administration in 2008, set a limit of 75 parts per billion, despite recommendations by EPA’s science advisers to place it between 60 and 70 — ideally, at the lower end of that range. The advisers have repeated that recommendation several times since.

On Wednesday, EPA proposed a range from 65 to 70 parts per billion. It’s also seeking comment on standards as low as 60 parts per billion — though the agency indicated it’s unlikely to go down that far, citing “increasing uncertainty in the scientific evidence at lower ozone concentrations.”

Even at 70 parts per billion, ozone can hamper breathing and cause an “increase in airway inflammation,” among other illnesses, the advisers told EPA earlier this year. “Although a level of 70 ppb is more protective of public health than the current standard, it may not meet the statutory requirement to protect public health with an adequate margin of safety.”

Environmentalists maintain that 60 is the right number. “The scientific record clearly shows that a standard of 60 ppb would provide the most public health protection,” American Lung Association President Harold Wimmer said Wednesday, though he called EPA’s new proposal “long overdue.”

But industry groups said a 60-parts-per-billion rule would instantly put much of the country out of compliance, bringing a lot of new manufacturing to a halt. The American Chemistry Council said in October that chemical companies alone have announced 211 shale-related projects in the works, representing $135 billion in capital investment, which they argue could be at risk under a tightened ozone rule.

In his letter to Obama, Beshear said a limit around 60 parts per billion would mean that “all 29 of the air monitors that Kentucky operates will exceed the standard.” With a standard closer to 70, only major metropolitan areas would be affected, he wrote.

A standard of 60 parts per billion was also the basis of the National Association of Manufacturers study that warned of trillions of dollars in costs.

Eisenberg said communities have spent a lot of money to cut emissions already, “and here they’re almost in the promised land and EPA’s going to move the chains again.”

The Republicans who will soon rule the Senate are already pushing EPA to back down. Last week, Vitter and Inhofe asked White House regulatory chief Howard Shelanski to make sure EPA doesn’t move forward with a new standard until the agency gets a comprehensive cost-benefit analysis from the agency’s Clean Air Scientific Advisory Committee.

“By any measure, the revised ozone rule will represent one of the costliest rules ever issued by EPA,” Vitter said, calling it “one of the most devastating regulations in a series of over-reaching regulatory actions taken by this administration.”

Thune’s bill would stop EPA from tightening the standard until 85 percent of counties that don’t meet the current limit are able to comply.

But the Congressional Research Service’s October report said it’s far from easy to make solid cost estimates, adding that implementing the rule could take decades.

CRS report author James McCarthy said it took four years for the states and EPA to decide which areas weren’t meeting the Bush administration’s 2008 ozone rule — and earlier, it took seven years to make the same determination after the Clinton administration had set its own, less stringent ozone standard in 1997. In both cases, states then had three years to write plans specifying what pollution controls they would impose.

Meanwhile, some counties may end up meeting the new ozone limits because of separate regulations EPA has enacted, such as the “transport rule” to limit power plant emissions that drift across state lines, and the “Tier 3” rule requiring refiners to lower the content of sulfur in gasoline.

Under the court order, EPA must follow up with a final rule by Oct. 1. EPA doesn’t have to tighten the standard — it just has to finish its review and make a call either way.

Steinzor was optimistic that Obama won’t back down this time.

“I’m hopeful that he’ll remember that he never has to stand for election again, and that his rule will make a huge difference in terms of public health,” she said.